Pairs trade: Bp vs. Shell

Abstract

This paper investigates the existence of a Pairs Trade strategy concerning two companies in the Oil and Gas (O&G) industry: BP and Shell. This industry faces significant challenges: the growing concerns about CO2 emissions and the transition to net-zero to reverse climate change, the COVID-19 pandemic that brought changes in consumer patterns, and the recent Russia Ukraine conflict. As such, investigating how companies in this industry perform becomes challenging and of utmost relevance for practitioners. A thorough analysis of the companies financials and share price movements revealed that a Pairs Trade strategy between BP and Shell is possible, though with its risks.